CARES Act: Implications for travel, transportation and hospitality companies

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The COVID-19 crisis has been a shock to the system on every level for travel, transportation and hospitality (TTH) companies. Many TTH leaders are working around the clock to try and do the right thing by stakeholders — employees, customers and business partners. They’ve had to make painful decisions about furloughing large portions of their workforce because of the industry’s dire situation. 

The $2 trillion CARES Act is available to assist TTH companies as they respond to the crisis, support workers and stabilize finances. 

cares act travel
CARES Act travel, hospitality

Among the tax implications analyzed by PwC are the following: 

  • Net operating loss 5-year carryback
  • Temporary refundable employee retention credit
  • Delay on payroll taxes
  • Expanded business interest expense deductions.

These provisions should bring much-needed relief to TTH companies, but there are also conditions to think through. Below are some considerations for navigating the details: 

1. Keep your workers safe

The CARES Act includes a variety of provisions to help protect workers. That could mean potentially keeping them on payroll even if they are not currently working. Meanwhile, some employees still need to work on-site, and keeping them safe is essential. With the appropriate technology, you can stay connected to your workforce while obtaining a near-real-time view of their productivity. 
 
For employees now working remotely, cybersecurity takes on new meaning. In-home technology may not be secure enough to transfer sensitive information online, and several companies have already experienced increased attacks on their systems. Taking the right steps for cybersecurity can help confirm a more cybersafe remote work environment. 

Meanwhile, furloughed employees — used to seeing team members every day — may need support to help stay engaged and keep their skills current. From digital upskilling to seamless virtual communications, the technology exists to help employees stay connected during this challenging time.
 

Covid-19: Top 3 workforce considerations:

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2. Choose the mix of funding that works for your company

The CARES Act offers significant funds, but the paperwork can be complex, the money may take time to arrive and certain conditions may apply. These include prohibitions on:
  • Buying back shares
  • Raising executive compensation
  • Furloughing or laying off workers (Under the Payroll Protection Program, funds have certain restrictions. For example, they are required to be used for payroll and other monthly expenses such as rent.) 

If you’ve already had to furlough workers, you may still be able to qualify if you re-onboard them within a certain timeframe. Some loans may also require collateral and interest, with rates similar to market rates. 

Despite these limitations, the grants and loans provided by the CARES Act can be essential for the viability of many TTH companies. Meanwhile, self-funding and external funding can also help play a role. Some of the tax benefits of the CARES Act — such as the change in business interest expense deductions — can help to reduce borrowing costs significantly.

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3. Provide support for franchisees

The $377 billion in aid for small businesses can be used for payroll, mortgage, rent and utilities. The loan may also be eligible for forgiveness provided certain conditions are met in the period following loan origination — including maintaining employment and pay levels.
 
However, many franchisees and individual hotels may be limited in their resources and unable to apply in a timely manner. The companies under whose umbrella they operate can offer a franchisor solution to help manage advice, a project management office (PMO) and tool capabilities to help expedite your application. 

TTH companies can set up a system to help monitor progress on CARES Act applications for their franchisees. This may provide support as needed, while also helping supply updated communications to stakeholders and the government.

 

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Going the distance

Workforce considerations and financial stability are clearly top of mind right now — and the CARES Act offers valuable benefits in both areas. For stability in the months ahead, also consider assessing your entire ecosystem: customer operations and marketing, your supply chain and even your competitors. 

The travel landscape will be transformed in a post-pandemic world. And companies rising to the top  to the top may well be those that learned to stay afloat, adapt their processes and invest in key capabilities. 

Contact us

Tyson Cornell

Tyson Cornell

Consumer Markets Industry Leader, PwC US

Jennie Blumenthal

Jennie Blumenthal

Transportation and Hospitality Leader, PwC US